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Brave new world: Transforming healthcare technology M&A in life sciences

Life sciences companies are placing bets on healthcare technology that helps them reshape product portfolios to focus on patient outcomes.

Overview

Explosive advances in healthcare technology are creating “technology M&A” opportunities leading to new patient-outcome focused pharmaceutical business models. Digital is a crucial vehicle to create healthcare technology-enabled services that enhance the value of products and improve patient care. With deal activity between biopharmaceutical and medical device organizations at an all-time high—the race is on to reshape product portfolios and place bets on new technology to position for growth and innovation.

Life sciences companies need to redefine their role in the new healthcare ecosystem, going “beyond pills and apps.” Providing a combination of products and embedded services to augment market position and deliver improved patient outcomes is not traditionally a core pharmaceutical skill set. Yet pharmaceutical, biotech and medical
device companies are well poised to participate in this transformation since they have the ability to go beyond just offering products to offering solutions to the largest healthcare cost-contributors, including cancer, diabetes, heart failure, COPD and neurologic disorders.

Background

To say that the pharmaceutical industry is changing is an understatement. Healthcare reform in the United States has started to shift risk from payers to providers and, in turn, to consumers. In response to this fundamental change, huge effort is being focused on innovative ways to take cost out of the system, demonstrate superior health outcomes and improve patient experience and satisfaction. 2014 marked a high point for M&A activity in life sciences with more than $390 billion in transactions, a level that dwarfed the previous years’ volumes. So far, this momentum is sustained in 2015. Significant advances are now possible thanks to the ability to capture and exchange patient health information. What’s more, big data and analytics capabilities allow for the processing of vast amounts of data sets quickly to enable individualized interventions at the point of care.

All of these factors have led to unprecedented explosive growth in new applications and capabilities for managing healthcare and delivering better patient outcomes.

Analysis

Pharma has traditionally looked at M&A as a source for therapeutic assets to fill the development pipeline. But turning that lens to healthcare technology can generate a differentiated market position and help re-define life sciences companies’ role in the new healthcare ecosystem: positioning them as a solution provider and thus changing their perception from being a contributor to healthcare costs to an essential player in helping deliver improved health outcomes. Life sciences companies can leverage this transformative healthcare technology wave by creating interconnected ecosystems and exploring promising technology assets from a pool of thousands as a source of growth and innovation to add to portfolios.

Recommendations

Pharma needs to uncap the potential of Healthcare Tech M&A to transform its business model. Using healthcare technology to augment clinical outcomes will be an increasingly important part of the pharmaceutical corporate business model. There are several at-scale examples to indicate that the healthcare technology enabled M&A model is sustainable. There are some immediately actionable areas where healthcare data and technology can provide unique opportunities and insight. Life sciences companies who can apply their M&A tools, identify these opportunities, and test and scale up new healthcare technology-enabled business models will gain greater operational agility and competitiveness.

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